This is why your growth isn't picking up

There's been a bunch of change happening lately. And a lot of excuses to. It's time to accept the changes and adapt to (finally) start growing again.

• (00:00) - Introduction
• (05:47) - Growth and Market Dynamics
• (10:59) - So what exactly has changed?
• (11:23) - Changes in Buyer Behavior
• (11:48) - The Rise of Buying Committees
• (14:09) - Focus on Cost Reduction
• (16:13) - The AI Buyer Emerges
• (16:42) - AI's Rapid Improvement and Cost Efficiency
• (19:39) - AI's Market Impact and Investment
• (23:40) - Outcome-Based Pricing Models
• (29:11) - The Future of AI in Business

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Creators & Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

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[00:00:00] Toni: Hey Everyone, this is Toni Hohlbein. You are listening to the Revenue Formula with Mikkel and Toni.
[00:00:05] In today's episode, we talk about the real reason your growth isn't picking up. Your buyer's behavior has fundamentally changed. Why? Listen Because of AI. Enjoy.
[00:00:17] Before we jump into the show, today's episode is brought to you by Fullcast. The only AI powered platform that streamlines your entire sales cycle from plan to pay.
[00:00:29] Customers report up 80 percent cost savings, 20 percent growth in pipeline, and 30 percent boost in RevOps efficiency.
[00:00:37] With modules like Territory and Quota Management, Routing and Capacity Planning, Fullcast adapts to your unique needs whether you need one solution or an all in one platform
[00:00:49] Visit fullcast. com, book a demo, and mention the revenue formula podcast. To unlock an exclusive premium gift just for listeners
[00:00:59] And now enjoy the show. You know, I, maybe I need to post a picture on what I'm actually looking at right now.
[00:01:06] There's a, there's a ladder in front of me with, you know, boards, you know, on the, on the different steps. And then on those boards is a camera that
[00:01:15] Is kind of wiggly right now.
[00:01:17] And then below that is a laptop. It's totally crazy. It works. It took me, I don't know, I think I had to order 10 separate pieces of hardware that I just very smartly you know, ordered one by one.
[00:01:30] Oh, I got this now. Piece it together. Hmm. I need another one.
[00:01:34] Mikkel: So two
[00:01:36] Toni: two weeks.
[00:01:37] Mikkel: two thoughts, because I also have a crazy setup. I basically have two bar stools with a laptop on and the other has a very expensive camera on top and then some play children play stuff. We should just take a picture of that. Yeah. Add it to the episode because YouTube is on fire. People are watching the show more and more, which is kind of saddens me with the quality issues we've had, but now it's actually working and we can add those pictures just so people can see how crazy that is and we'll definitely do better.
[00:02:02] That's a, that's thought number one. The other thing is it makes me think of those people who buy, you know, that massive solution, Salesforce, hundreds of seats. All the bells and whistles. And then they basically mess it up with a ton of custom objects uh, opportunities for every conceivable use case.
[00:02:19] And they, and it's just a mess. It's just a mess.
[00:02:21] Toni: really talk about it as if you actually had any clue about it, Mikkel.
[00:02:24] Really, really
[00:02:25] Mikkel: I've I've just been on the
[00:02:26] Toni: I think you fooled probably three people.
[00:02:28] yeah,
[00:02:31] Mikkel: I was always just the person who said. Toni, Mikkel, whoever. This is too complicated. I don't even know how to log in. Can you just get this one thing for me out of the whole tool?
[00:02:41] And they're like, Oh, this guy again, this guy again. And I think that's also,
[00:02:46] Toni: what's way
[00:02:46] Mikkel: that's the, that's the segue. Uh, That's the segue that's coming. I know you wanted to kind of jump in and say, what's way more important is the segue. How are we going to now stitch this thing together? That's the thing behavior is changing.
[00:02:57] Behavior needs to change and behavior is definitely changing. We. Have spent so much time this year and I almost want to just end the episode now, but we've spent so much time talking about all the challenges, all the pains uh, all the struggles of this year. And I think a lot of folks, maybe you and I included it kind of happy it's coming to an end by now.
[00:03:17] Toni: Yeah, sure, right? But also I gotta say, Folks, we need to stop whining, You know, the big wine is officially over. And you know what, actually wine a little bit more for the next you know, month. But come January 1st, yes, you will go back to the gym for like two weeks and then, you know, leave that behind. But also the other change you're going to make is like stop whining about how shitty things are and it's difficult to grow and blah, blah, blah, blah, blah. And the reason is other folks are actually by now doing it. And another reason is also, I believe that you know, it's just a little bit also what Jacko was talking about. By 2025 I think people in the boardroom won't buy the whole, Oh, it's so difficult to grow anymore. I
[00:04:01] think it's over. I think it's
[00:04:03] Mikkel: it's
[00:04:03] like, that's what you said Q1 last year. Come on.
[00:04:06] Toni: And, and back then we believed it because everyone was kind of going to the goddess, but right now it's like,
[00:04:11] it's, it's over now. Come on, drag yourself out of the mud and, and then let's go.
[00:04:15] Mikkel: And you also have to realize those board members, some of them, they're going to sit in another board where someone, they figured it out and they cannot reconcile, well, why then have you not figured it out? What's going on here? Something is just, something doesn't add up. And I think that's actually, by the way, one of the interesting points. I saw a post from Saster uh, I think a couple of months ago where they were So is growth back in SaaS, it's confusing. I was like, yeah, it's confusing because there's so much happening right now. We still, I think, have the legacy of. Sales is just brutal, right? It's really difficult. what was it like some 60 percent of sales reps, they are not going to end up making quota this year, which is just too much. Uh, That's not what you want to have. And, uh, efficiency metrics. If you've seen any of those reports from Winning by Design and I think David Spitz, it's kind of like, we're still doing growth at all costs, at least for some of the publicly traded companies they run this analysis on.
[00:05:12] Toni: I think, I think this whole growth at all costs thing, I think it was a great marketing hype and I think Sam from Pavilion is still talking about it like crazy, but I think we're still all doing it, by the way,
[00:05:22] we're all, we're all doing it just on a, on a, on a
[00:05:25] sadder budget. You know, the budget is just smaller and it's like, we're still doing all the same tactics but we're, we're calling it profitable, efficient growth now.
[00:05:34] Mikkel: it's a marketing rebranding. That's what it is. Oh God. Wish, wish I was in that meeting, that brainstorming session. That would've been awesome. But I think, I think that's all, there's all those things that are just, they're not working. They're not great. Right.
[00:05:47] But there's another thing that starts to appear, which is growth is kind of resurfacing.
[00:05:53] Like, initially I remember, uh, hearing from Snowflake and Datadog and a bunch of those consumption based pricing vendors that their, net dollar retention was dropping. It was like insane to begin with because it was consumption based, but it was dropping because You know, guess what? Customers were optimizing their consumption to kind of lower the cost, which makes total sense.
[00:06:13] That's kind of done now. So growth is slowly coming back. Bessmer Ventures, they basically did a survey of, I think it was cloud 100. You could see that it looks like the, let's say the bottom is in, in terms of the, the growth rate and it's now increasing, right? So there are some signs at least that growth might be returning a bit.
[00:06:33] Toni: No, and then you have. You know, you, you always used to have those, Oh, from zero to a hundred million in, you know, 12 and a half days or
[00:06:40] something like that. I mean, there's
[00:06:41] always kind of
[00:06:42] Mikkel: In a couple of
[00:06:42] Toni: companies, right? Boom. And there was deal for example. Well, how did they do it? You know, it just, it just took a global pandemic and that's, that's how they did
[00:06:50] it.
[00:06:51] Mikkel: Just, just look for that
[00:06:52] Toni: just, do that, right? there. were, there were always those like, okay, wow, this thing coincided just beautifully with something else that drove crazy demand and then
[00:07:00] everything went through the roof. But. And I think it's really lazy to just you know, you know, deal with it. Why can't it be there?
[00:07:06] There are plenty of reasons why you can't do it. But I think what's starting to emerge now for me, there are a couple of companies out there that are growing like crazy. And I'm just going to name them actually from, from who I actually know this.
[00:07:18] 11x. Yes. They have a churn problem. Yeah. Yeah, I know they do.
[00:07:21] But I think it took them six months to get to a million from zero to one. Then it took them another two or three months to get to 2 million. And since then, and this has been now been going on for a year, they've been adding a million dollars a month and maybe even more by now, right? So why did you know, A16Z, so Andreessen Horowitz invest?
[00:07:39] Well, because of that, they're growing like crazy. So, You know, it's parked that in the corner over there. Next one, copy AI. We talked to Kyle what he tripled ACVs and shortened sales cycles and improved conversion rates. And they're on a, on a trajectory to triple or quadruple or something like that.
[00:07:55] Crazy. So I can only imagine that probably are like at five or 10 million and now going to end the year, what, maybe 40 million, something completely insane. And then very recently I saw Cursa.
[00:08:08] So Cursor is actually for developers, right? So basically kind of helps them write code or they have like this terminal with the right code and Cursor is basically doing this plus AI and Cursor went from 1 million last year to 65 million AR this year. Like, you know, think about this is not, this is not, Oh, you know, suddenly everyone needs to stay home and zoom. Everyone now knows what a zoom call is and everything goes through. No, no, no, no. This is something different. This is people have been writing code for, for ages now, and they just come along, have a different coding app.
[00:08:40] Yes. AI is in there. Yes. And you know, we will be talking about that, but they went from 1 million to 65 million in the course of this year. Right. So it's starting to be increasingly hard. And those are just the top brass that I know about.
[00:08:53] And then there are plenty of other examples. It's just getting increasingly hard to say like, well, sorry, we can't grow.
[00:08:59] And probably the, the board member that sits in your board that also sits in another board is like, well, you know, I'm not so sure anymore. I
[00:09:05] think other people can pull it off. Why can't you pull it off?
[00:09:08] Mikkel: I mean, we're going to talk with Peter Walker from Carta fairly soon. They do a lot of, uh, surveys and reporting on let's say VC rounds and all that stuff. I'm sure he will also be able to help us shed some light on what is, is, is things normalizing a bit or improving? Because the other thing I've at least noticed is there are a couple of IPOs getting ready, right?
[00:09:26] So Stripe for one is slowly getting
[00:09:29] Toni: So, so crazy that they're not public yet, by the
[00:09:31] Mikkel: Yeah, it, it is crazy. But you know what, if, if you know the market has not been in favor of,
[00:09:36] Toni: of course not.
[00:09:37] Mikkel: then
[00:09:37] uh, then, then it makes sense, right? But, so at least those, it looks like the IPOs, they're back it looks like we're slowly minting more unicorns.
[00:09:45] Also something that would be great to hear from Carta. So, so let's just say it's confusing, right? It's confusing. Growth is expensive, but growth is returning. still a lot of folks, they won't hit target. A lot of sales reps, they're gonna miss.
[00:09:58] Toni: I'm going to mess you up here one more time. Actually the, you know, a couple of people listening on him now say like, well, you know, many from outreach just stepped down. He's not the CEO anymore. Sales loft, they kind of merge with drift. They're shedding people like crazy, shedding customers like crazy as well. There are a bunch of companies out there that have been at the threshold of IPO. And now I missed it. It's over. This game is, you know, Salesloft will not go public. Outreach will not go public. This thing is over. And then there are a couple of others there. And you know, I think it's easy to still find the losers in the market and point finger and say kind of, Hey, see also them, but it's, it's just not the majority anymore.
[00:10:36] It's not, there's a lot of companies going in the right direction. And I think this is what you need to be focusing on.
[00:10:40] Mikkel: Yeah. So, regardless,
[00:10:45] it's it's confusing out there and you confuse me a bit, but it's confusing out there, right? Because you have all these challenges with our sales reps, even going to hit target efficiency is terrible, but you're still seeing growth return, right? So. What can we do? What can the listener do?
[00:10:59] I
[00:10:59] think we should talk a little bit about what exactly has changed because of all places, I found a hint as to what is actually happening, what is going on at the moment for you to end the whining. And I found it in a Salesforce, annual sales report, which is just. That's what it is. There was a really good explanation.
[00:11:18] Uh, I at least found for why it's difficult and why it's confusing out there.
[00:11:23] Buyer behavior and expectations have
[00:11:25] Toni: Have changed,
[00:11:26] Mikkel: fundamentally changed, right? We don't want to spend time going into the whole, Hey, how can we add more value? And, and what we're going to do now, I think we're going to run through just a very quick couple of points uh, what's changed over the last, let's say six to 12 months, we're going to flash through that real quick, and then we'll get to, the main, the main course of change.
[00:11:45] Toni: Let's go.
[00:11:47] Mikkel: So.
[00:11:48] I mean, if we're going super fast about it, it's no longer singular buyers, it's buying committees. There was a time where you probably, you know, the minimum approval amount needed was a lot higher, at least than it is today. Now the CFO Involved in every single deal. Uh, You have so such different variety of folks involved in deals and they're going to care about very different things.
[00:12:08] And that just makes it difficult. It means it takes longer. You getting those people into the meeting and getting the demo and deciding in a business case and all that stuff.
[00:12:16] Toni: I would, I would even say, and this is. different from different companies sizes, but I would even say up to a hundred million or something like this. It's, it's feeling a little bit like it's not necessarily a buying committee. It's feeling like it's really only the CEO and the CFO that buy stuff. Like, like every, everyone else is kind of messed up by now.
[00:12:38] Right. So yes, you know, we've been whining about rev ups, having a hard time, you know, buying things, but, You know, we very often went to the CRO and the CRO was like, Hey, this is great. Let me talk to, you know, CFO, CEO. And then the deal died. We, we just recently saw a post from Chris Walker talking about his last eight opportunities or something like this.
[00:12:57] And whenever the person was CEO or CFO was closed one, so it four opportunities closed one with those two on there. And whenever the persona was CMO, VP demand gen or whatever. Closed last so he's basically making the point that even his, and he's like a demand gen guy, right on LinkedIn and so forth. Even when it's super point on for what he's doing the places where he actually, you know, ends up selling stuff is with a CEO and the CFO,
[00:13:27] Mikkel: yeah,
[00:13:29] Toni: right?
[00:13:30] Mikkel: N, N equals eight in this case. Let's not
[00:13:32] Toni: Sure. Yeah, Yeah,
[00:13:33] But it's, it's just those breadcrumbs. Right. And then you have the other thing with Kyle from Coleman from from Copy AI, who basically pivoted the whole thing around and sprinted to the top of the
[00:13:44] pyramid selling to C level, right. And that then achieved higher ACVs, higher conversion rates faster sales cycles and so forth. So, you know, whether or not he's, you know, selling to CMOs or CROs or something like this, I think many times he's probably selling to CEOs
[00:14:01] and CFOs. And I think that probably might also be one of the reasons why, why these stats coming out of copy AI are so impressive.
[00:14:07] Mikkel: yeah.
[00:14:09] So, and I think the other interesting thing that's, uh, by the way, also happened in this entire process that's not been talked about is because of this focus on, on cost. You're basically now seeing vendors specialized in helping you reduce costs. So you have tools that will monitor your software stack and the usage of, basically it will identify shelfware that you can then go and cancel, right?
[00:14:31] Great, great solution. And it definitely fits in this time that we're in. If it was four years ago, people go like, we don't really need that. Do we? It's like, let's just go, go, go, go spend our time on something else. So that's, that's one side. And on the other, you have, Folks uh, helping you secure the best deal on software, right?
[00:14:50] Actually getting, getting the best price. We've had transparency, I think for a while, and, and people can lie and fool themselves and say, well, we don't have pricing listed, but it's just a Slack message away on Pavilion. I think those forces combined with a lot of other things. It means a couple of things.
[00:15:05] It means that the buyers, they just, they're risk off. They don't want to take the risk anymore because of the times we're in. So basically it's risk off and the buyers, they have more cards on their hand when you enter a negotiation to basically close software deals. Right. So I think on, on, uh, the buyer side, a lot of things have actually changed to that end.
[00:15:23] Toni: I would, I would even say that some of the magic of buying software has just ceased working.
[00:15:30] So I feel there was a time where if you either had a problem or didn't have a problem and someone brought a solution, a software solution, it was. Like, oh yeah, cool. That sounds, that sounds like great. Yeah, that solves the problem.
[00:15:44] Apparently. Let's go for it. Let's try it out We can still throw it out next year And I think that that has changed a little bit that buyer behavior has changed. I think the the magic of SaaS to be the solution to everything. And I'm not talking about the delivery method, but just how people are thinking about this solution space that they want to apply to their problem space. I think that magic has
[00:16:07] Mikkel: Yeah. Yeah.
[00:16:09] Toni: I mean, we, we both know where this magic thinking has now shifted towards,
[00:16:13] Mikkel: Let's hop into it because there's a new buyer. And if you haven't noticed, it's, um, an AI buyer, right? It's an AI buyer. I
[00:16:22] Toni: you don't, you don't need an agent, an AI
[00:16:25] Mikkel: No, I mean, like, it's a, it's an artificial intelligence that requests a demo. And hops on the meeting and then decides to buy the thing. No, no, of course not. uh, it's buyers who are looking specifically for artificial intelligence to implement at the business, right?
[00:16:39] So why is that the case? Why is that happening?
[00:16:42] You and I spoke with Jacco van der Kooij and one of the things that really stood out was the rate at which it's improving. It's 4X every single year.
[00:16:52] Toni: Yeah.
[00:16:52] Mikkel: think it was something like that. And by the way uh, before you jump in, Tom Tungus also kind of published something around just the cost of, you know, using AI is decreasing rapidly as well.
[00:17:05] So while it's improving, it's also getting more cost efficient.
[00:17:07] Toni: Yeah. So, I mean, what's pretty crazy, right? When you, when you think about something. Doubling every six months.
[00:17:14] So first of all, well,
[00:17:16] Mikkel: Wish it was my portfolio.
[00:17:17] Toni: in, in a year's time, well, you know, next lifetime uh, in a year's time, yes, it quadruples, right? It doesn't go from one to two. It goes from one to four. That's kind of pretty straightforward.
[00:17:27] We still like, okay, we kind of get that. And then Jacco was just pointing out, after 10 years, where do you think,
[00:17:34] you know, how, how many, how many times would it actually improved? And you know, I don't, I don't know what I said on the podcast, but maybe I said like, Oh, it's a thousand times or something crazy.
[00:17:43] Like even when I said it, I was like, probably wrong anyway. No, it's actually a million.
[00:17:48] Mikkel: Yeah.
[00:17:49] Toni: It's so ridiculous. If AI keeps or the performance or the quality of the output, whatever the fucking measurement is, and if that keeps doubling every six months for 10 years, Which basically is a thing that has happened with Moore's law on um, on compute power or the,
[00:18:06] the, the, the the size, you know, it needs to kind of does the same compute then it would get to a million fold of improvement over 10 years, which is absolutely mind boggling.
[00:18:19] If you wanted to even try and visualize this, what you need to do is you need to take a pizza, you take a knife. And then you need to cut it into 1 million pieces. Into 1 million slices. And then you take one of those slices out and say like, this is where we are today.
[00:18:38] The rest of the pizza
[00:18:40] is where we're going to be in
[00:18:41] 10
[00:18:41] Mikkel: Yeah,
[00:18:42] and it's gonna taste real good.
[00:18:45] Toni: Isn't this,
[00:18:46] isn't this insane? So, I mean, who knows if this can continue for 10 years, blah, blah, blah, blah, blah. But what I'm, but I think we're trying to say is the rate of improvement is, is
[00:18:56] absolutely nuts. It's completely crazy.
[00:18:58] Mikkel: and you're gonna see some moonshots. I was thinking about the other day, before the dot com bubble burst, basically, You saw all kinds of crazy startups emerge, like doing God knows what. A few of them still standing today, like, you know, Amazon for one uh, but a lot of them, they're just gone.
[00:19:14] There were never never like a fit for this world to begin with. And new ideas have spawned on the back of that kind of to, I think Jakob's point was like, could you have predicted Uber Eats if you couldn't predict Uber? And it's like, well, no, it's chain of events that needs to unfold. Anyway.
[00:19:31] Toni: with this Mikkel? I lost you. Can I have you down the street now?
[00:19:34] Mikkel: but, anyway, so I that's kind of one side, the improvement and cost efficiency of, of AI, right?
[00:19:39] The other is at the spend on AI next year projected to be around 340% Billion dollars, 340 billion. And the year after double, by the way, just think about that for a second. Double uh, is absolutely staggering. And, speaking of that Salesforce survey earlier, there was also a little nugget in there where 78 percent of sales leaders, they were afraid they were going to miss out on this AI train, right?
[00:20:08] Basically left on the station. so there's a lot of attention on AI from
[00:20:13] the
[00:20:13] Toni: there's a lot of attention, there's a lot of money.
[00:20:15] And you know, just to put these things into perspective, right? I think the total software market right now is around 650 billion.
[00:20:22] Mikkel: Yep.
[00:20:22] Toni: Total software market right now, 650 billion. I think your number was like 350, 375, not sure if it's 20, you know, 2024, 2025. But that's where we are already,
[00:20:33] you know, with, with just the AI budget. And then that's going to double and basically exceed the software market as a whole in a couple of years from now. Right. And the reason, and this is also, again, the reason why people are so excited about it, this is why they're kind of all these buyers out there. The reason is not any more I don't know, digitalizing kind of the, you know, the pen and paper that, or the chalkboard that he used or the, you know, the, the calculator that you, you know, from Texas Instruments used. No, it's not doing this anymore. It's actually now coming after people. It's coming
[00:21:04] after the 10 trillion people market on services and stuff, right? That's why this thing is. Uh, It seems like it's growing like crazy in comparison to software, but it's not crazy growth comparison to a 10 trillion
[00:21:18] service market, right? So that's why the trajectory are so completely different. They're going after two overall market ceilings. Um, And, and then the AI stuff is different there, right?
[00:21:27] And I think this is also the reason why all of those. Companies are plowing money. Not, you know, I'm not talking about Meta and Google and OpenAI, they're kind of building those, those frontier models and doing all of that, you know, legwork I'm talking about, you know, the normal, you know, Coca Cola uh, or I don't know what, whatever company that lives around the corner um, they're pouring money into this as well because they are basically seeing, Hey, there's, there's an opportunity for us to cut costs dramatically.
[00:21:55] Mikkel: Yeah.
[00:21:56] Toni: They don't actually know how yet. Like that's, that's, that's a big whole other kind of can of worms. And then you can laugh about that. I'm sometimes laughing about it, but there's a very big investment going in this direction. And to a degree, I think what is driving some of their thinking is like, it's, it's way more expensive to miss out on the wave than it is to, you know, place those bets and then it doesn't work out
[00:22:18] right.
[00:22:18] Kind of, if, if you have a competitor set and one guy doesn't invest at all in AI. And the other one does, and let's just say a hundred million dollars for them is like peanuts anyway, or whatever they're investing. If, if this AI thing doesn't work out, you know, one lost a hundred million and the other one didn't.
[00:22:34] Okay, cool. You know, who, who cares? But if it does work out, suddenly you're talking, you know, billions in, in, you know, loss out, basically kind of profits for those
[00:22:44] organizations, right? So kind of that's, that's the, that's the thinking. And that's also the reason why there's so much budget basically completely unlocked.
[00:22:50] Mikkel: And the question also was asked by Tom Tonkas. Where is the budget coming from? Where is it coming from? He found a survey from, I think, CIO. com. They had surveyed a bunch of CIOs. And, I think it was like 35 percent of the budget came from
[00:23:06] So if you're not doing AI today, guess what? The pie just got a bit smaller because now there's like an AI requirement in there.
[00:23:15] And the other, 41 percent was like, well, it's net new budget. So there's even more money being poured into this thing.
[00:23:22] And I think just to bottom line uh, this section, I guess, you've got to prioritize AI. You just, you have to do it if you're really struggling and you haven't done anything about it yet.
[00:23:32] Stop the wine, stop talking, start actually doing some stuff here.
[00:23:35] Toni: Yes. So what are, what are people doing about this out there, Mikkel?
[00:23:39] Mikkel: Yeah.
[00:23:40] So I think one of the interesting things you mentioned earlier was the whole, Hey, people see an opportunity to cut costs with AI. So look at Intercom, right? They were one of the early, early ones. Let's say the early incumbents to basically move into AI. And they added, obviously a service agent that can help close support tickets down, right?
[00:24:00] And the way they're charging out on this is at one buck, right? Per ticket closed.
[00:24:05] Now let's just say for argument's sakes that it costs on average, five bucks to close a ticket with a human. So there's a potentially some money to be
[00:24:15] saved. And
[00:24:15] Toni: No, but
[00:24:15] but even, yeah, but, but even that, that leap in thinking, I think this is the interesting thing that's happening right now,
[00:24:22] right? Because it's not, okay if we kind of use this software, we need to switch less between contacts and our humans can, you know, Process, you know, 20 percent more tickets
[00:24:34] or whatever it might be, right. And that overall might mean we can reduce the workforce by 15 percent or we can deliver better quality and you have all of those very complicated ROI calculations going on. That's not the case anymore. We're now, we're now talking, okay, wait a minute. Funny enough, we actually never raised that stat.
[00:24:52] So, uh, how much are we paying per outcome? Like how much are we currently paying humans to deliver the outcome that we want them to deliver? And suddenly they figure out, and by the way, 5 is, is, is low you know, they're probably kind of figuring out that they're paying 10, 20, 15, I don't know what
[00:25:09] dollars, like per closed ticket, right?
[00:25:13] Because, well, what do you need to take into consideration? Well, you know, sick leave, holidays uh, all kinds of benefits. Everything around the office space, the supervision, all of that stuff you basically need to take into consideration And then in comparison, you get a 1, is it 99 cents or what is it?
[00:25:33] Something, something crazy basically, where people immediately be like, okay, there's a massive, you know, drop off here in terms of cost. That seems like something we should try out. And I think by now, everyone goes into this, not with a, oh, we plug this in and everything is solved. I think by now people are waking up to the realization that each of these agents, each of these AIs, each of these, whatever you want to call them, you do have to treat them a little bit like an employee. Yes, they're super smart. You can plug them in. They learn extremely fast what's going on in the organization. They see the previous conversations you had, they use it as learning material to apply that to their kind of next conversation that might come up, but you might need to give them some guardrails, you need to teach them, you need to tell them what's good, what's bad, and you know, when, when a new employee walks through the door. That's not what your expectation is. Your expectation is you're going to onboard them and so forth. Something similar actually also, you know, needs to be the expectation with AI,
[00:26:30] right? And then over time, I mean, yes, maybe this human is going to still do a better job and this is, you know, if you think support and call center and so forth, already questionable there, maybe they're going to do a better job. And we've seen horrible examples with some of the AI stuff. But ultimately is, is that increase in quality worth the, the massive drop in cost? And I'm not so sure
[00:26:57] about this. Right. And I think this is what everyone is thinking about right now. You know, and then also applying this, not just to the support side, but to sales, to CS, to marketing, to basically all the, you know, large, large roles,
[00:27:10] like way of volumes of people working on
[00:27:13] Mikkel: Yeah. So I think the interesting piece is, and you, you could, you should check out, uh, on growthonhinge. com. There's an article also jumping into this whole, Hey, are we moving away from a. Access based price, I think is what he calls it, right? So meaning pricing per seat, basically. Are we moving away from that and into charging on the back of outcomes?
[00:27:33] And you kind of had that keyword also now, Jacco called PPX. So pay per, whatever, image, paper, ticket closed, paper, whatever outcome uh, you're basically looking for. And as I started looking into this. what is happening? It's basically two things. If there's, if you're an incumbent, you're going to do a blended approach.
[00:27:53] You're going to have a per seat based pricing. Why? Well, you have a ton of AR sitting there right now. So if you just eradicate that part of your pricing, you're going to have a problem, right? It's, it's a, it's too much of a painful shift to basically make, right? And then you're going to add AI on top with a, some kind of consumption based, uh, no, not, sorry, not consumption, but a outcome based approach, Salesforce did actually do it on consumption. They did it on chat. So cost per chat, basically. Uh, But for most, uh, it's going to be on the outcome. So think of it as AI generated images. And then you price it out on the back of that, uh, new entrance. So we talked a bit about 11 X, et cetera. On the surface, it seems like most of them, they do a pure uh, pay per outcome approach.
[00:28:39] I do have a hunch that for the majority, there is some kind of credit system. Running in the background, which makes sense. You want to have some kind of predictability and what if, you know, you jump through all the hoops to get them going uh, they I don't know, they close two tickets and then they never use the thing again, Uh, Would be great for the customer, not so great for the business side. So I think those are some of the things that are, are happening. we can probably discuss at great length. Who can implement uh, Comp plans will definitely get tricky. So what are some of the limitations?
[00:29:11] I think this is an entire episode on its own, but I think just the walkthrough we've done here buyer behaviors change that there are now AI buyers out there and there's a different way to basically sell to those buyers.
[00:29:23] That is, I think, some really important signals to pay attention
[00:29:26] to.
[00:29:27] Toni: This, this buyer behavior has changed in a way where They are now also starting to expect that pricing is going to change. Just like, just like per seat was totally the thing because, you know, you, you had 10 hammers and you digitalized them and now you need a 10 versions of those 10 hammers.
[00:29:45] Now it's a little bit different.
[00:29:46] Now it kind of actually talking about in a different way. And therefore some of the, you know, I think they call it the value metric. It's going to, it's going to change. What is going to happen though, I think is some of the stuff is going to take some time.
[00:29:59] I think what I'm really impressed by is a company called Pylon.
[00:30:05] They also just did an, uh, Andreessen Horowitz round,
[00:30:08] Mikkel: right? Uh, competing
[00:30:09] Toni: of support CS. Uh, They're going after the whole Zendesk and, and equivalent market.
[00:30:15] And what they're doing, their pricing is crazy. Everything that Zendesk does, all the software, all the platform stuff for free. You can take it, like have it. And by the way, what they've built is very competitive. It's very compelling. It's very good software, but they're giving all of this away for free forever. And um, in return, they're basically saying AI agents and, you know, some of them are in use already. Those are the things you're going to be paying for. And they're basically. I mean, they're effing the whole support market,
[00:30:48] actually. Because the reason why Zendesk, to your point, the reason why Zendesk can't do what you, what, what Pylon is doing is, well they're a public company, they have probably a billion in revenue on this free stuff that Pylon is just giving away, And, you know, their AI revenue is like, is a joke right now.
[00:31:06] It's probably, you know, maybe 20 million or something like this. I don't know. It's probably not much. And kind of you have this new entrant. It's like, well, I don't have this 1 billion problem, but I would love to have your 20 million problem. So let's do that. And they're doing exactly this, right? So I think um, yes it will be difficult for incumbents. Uh, It's going to take some time to make that shift though.
[00:31:25] I think it's going to take some time.
[00:31:26] Mikkel: I was just imagining the Zendesk earning call where they go like, So, hi, Wall Street, just FYI, seat based pricing thing. Yeah, not doing that anymore. We're going to go for the AI thing. And they're like, but it's only 20 million. What are you doing, guys?
[00:31:41] Toni: There's also another thing, a couple of people are saying PPX and then so forth. But for example, if you look at those AI like 11x and a couple of others the real outcome you actually want to pay for is positive replies. It's basically kind of meetings booked or something like this, right? Guess what they're not pricing on.
[00:32:00] Mikkel: Yeah,
[00:32:00] exactly that. But also, and I think this is why it warrants a different episode. It's, well, did we get that outcome because of the AI or something that we did? So, I'll leave it at that and then we'll let it brew. And we'll do an episode just diving even deeper, I think, into this subject, because there's so much to cover, so much to talk about.
[00:32:21] If you haven't already and you don't want to miss that episode, make sure to subscribe to this show. Uh, You can also subscribe on YouTube if you prefer the video version. It helps us grow the show,
[00:32:32] Toni: thanks, thanks, a bunch everyone. Thanks Mikkel, uh, see you around. Bye.
[00:32:35] Mikkel: Bye.